Who governs virtual worlds?

NEW YORK--Who governs virtual worlds?

As games like World of Warcraft, Second Life and EverQuest grow and develop more sophisticated communities, that question will become more and more important. So much so that a group of experts appearing Friday at the fourth annual State of Play/Terra Nova symposium at New York Law School here spent nearly two hours putting the subject in context.

When disputes arise over in-world fraud or avatars attacking avatars, for example, what law should prevail?

Despite what the designers of some virtual worlds might like to imply, the group agreed, such environments are not autonomous countries and are therefore subject to real-world national laws. But because lawmakers in countries like the U.S. have been slow to understand virtual worlds and the legal, social and economic issues that arise in them, the experts said, legislators have not yet addressed many of those issues.

"The ultimate governance of virtual worlds is the state."

--Greg Lastowka, assistant professor of law, Rutgers

Perhaps the biggest question is whether the trade in virtual goods--weapons, armor, clothing, buildings and the like, all of which have real-world financial value--is taxable. Because that is such an important question, a separate panel is planned for discussion on it Saturday.

But beyond taxation are plenty of legal issues, which the experts addressed at the event, largely an academic gathering where professors from a slew of top universities come to talk about the intellectual, legal and social issues around virtual worlds.

One of the first questions was what game designers can do to stop players from defrauding each other. Such activity can happen in many ways, including dishonest transactions of virtual assets.

"If fraud is fun, and built into the game, and people are defrauding each other with virtual items with real-world prices, you might say, 'You defrauded me,'" said Josh Fairfield, a panelist and associate professor of law at Indiana University School of Law. "Well, yes I did."

And while many players may expect that rules governing fraud are set in games' terms of service or end-user license agreements, Fairfield said that's not true.

"Contract law cannot regulate players' interactions with each other," Fairfield said.

That means there's nothing a publisher can do to stop such behavior, and players who find themselves with such complaints may have little choice other than to seek legal redress. But such help may well be slow to come, the panelists suggested.

Another issue Fairfield brought up was so-called real-money trade, the buying and selling of virtual goods for real money that occurs largely outside online games. It doesn't take place officially under the auspices of the games because most publishers say they oppose such behavior. But hundreds of millions of dollars in such goods are traded on markets like eBay each year, and the publishers have done little to stop it.

"They say publicly, 'No, we don't like it,'" Fairfield said of the publishers. "But privately, they support it...Why? Because it makes them money."

To Greg Lastowka, a panelist and assistant professor of law at Rutgers School of Law, the virtual-world governance landscape boils down to two categories: internal and external views of governance.

Internal governance, Lastowka said, is that which takes place between players and publishers. External governance is how any organization handles disputes with the real government.

As far as internal governance goes, he explained, legal disputes between players or between players and publishers are likely to be treated like any such dispute.

"The ultimate governance of virtual worlds is the state," Lastowka said. "The law doesn't treat virtual worlds as any different. The state is not going to accept" virtual worlds being treated as autonomous regions.